Accepting Late Rent Could Hurt Your Legal Position

Let’s say that you rent property to someone else. Maybe you’re a landlord of residential or commercial property. Hopefully, your tenants pay on time, but sometimes, problems happen, and the payment is late, or doesn’t show up at all.

Should You Work it Out?

On the one hand, you want to work with tenants—kicking tenants out can cost you more than it can benefit you. This is especially true for tenants who have paid on time in the past, and who you may have  long standing relationships with.

And if the tenant is just asking for an accommodation—say, a late payment, or some other temporary modification of a payment term—for business purposes, and just to be a decent human, you may be inclined to want to work with the tenant.

Watch Out for Estoppel and Waiver

That’s not bad advice—working things out is almost always better than litigation. But be careful, because these modifications can end up costing you a lot in the long term.

Imagine you let a tenant pay late. A day here. Two days next month. A little less rent than normal the next. And then one day, the payments completely stop, and it’s time to evict the tenant. Seems like this would be an easy task. But you have now established a pattern of inconsistent rent payments, or of accepting late payments. And the tenant has come to rely on this pattern.

The tenant will likely assert a defense called estoppel. This generally means that your behavior, or your legal position, is something the tenant can rely upon, and it almost becomes a new agreement or modification to any prior agreement.

It is similar to the idea of waiver of contractual terms based on the conduct of the parties, when that conduct is inconsistent with the terms of a written contract.

The tenant can argue to the court that he or she believed that late payments had become OK, and that you established an acceptable pattern of late payments. Because of that reliance, the tenant can argue that he or she should not be evicted.

How to Accept Late Payments

This isn’t to say you should never be nice, or make concessions. But when you do, you should take some precautions to avoid having a problem if you need to evict later on.

One precaution is to clarify, in writing, that making some modification or concession, is not a waiver of any right, and that you expect continued payment, in full and on time, going forward. This is not a contract, so the tenant doesn’t have to sign or agree to it, as long as the tenant gets notice of it.

You can even include language like this in your initial lease, that concessions or alterations cannot serve to alter the written terms of the agreement.

Problems with your residential or commercial lease or contract? Call the West Palm Beach business litigation attorneys at Pike & Lustig today.

Sources:

investopedia.com/terms/e/estoppel.asp

courtlistener.com/opinion/1125805/vines-v-emerald-equipment-co/